Xerox Reports First-Quarter 2017 Earnings

Xerox (NYSE: XRX) today announced its first-quarter 2017 financial results. “I am pleased with our operational results in the first quarter,” said Jeff Jacobson, Xerox chief executive officer. “Revenue and cash flow were in-line with our expectations and, despite currency headwinds, operating margin expanded driven by productivity savings from our Strategic Transformation initiatives.” Jacobson added, “While we still have a lot to do, we laid the foundation to deliver on our full-year commitments.” The company delivered first-quarter 2017 GAAP earnings per share (EPS) from continuing operations of 2 cents. Adjusted EPS was 15 cents, which excludes 13 cents per share of after-tax costs related to the amortization of intangibles, restructuring and related costs, certain retirement related costs, loss on extinguishment of debt and a tax benefit. During the quarter, the company’s earnings were impacted by a charge related to its equity investment in Fuji Xerox, resulting in a 3 cent reduction in both GAAP and adjusted EPS. Revenues were $2.45 billion in the quarter, down 6.2 percent or 4.3 percent in constant currency. Post sale revenue was 80 percent of total revenue. First-quarter adjusted operating margin, excluding the impact of the Fuji Xerox charge, was 11.4 percent, up 0.9 percentage points from the same quarter a year ago.

Xerox generated operating cash flow of $190 million from continuing operations during the first quarter and ended the period with a cash balance of $1.05 billion. The company returned $87 million in dividends to shareholders and repaid $1.30 billion of debt. Fuji Xerox is an unconsolidated entity in which Xerox owns a 25 percent interest and Fujifilm Holdings Corporation (Fujifilm) owns a 75 percent interest. On April 20, 2017, Fujifilm announced it is conducting a review of the accounting at Fuji Xerox’s New Zealand subsidiary related to the recovery of receivables associated with certain leasing transactions that occurred in, or prior to, Fuji Xerox’s fiscal year ending March 31, 2016. The Fujifilm review is ongoing and a charge of approximately $30 million in the first quarter of 2017 represents Xerox’s share of the current Fujifilm estimated adjustments from this review.

Full Year 2017 Guidance
The company reiterated its full-year 2017 guidance of GAAP earnings from continuing operations of 44 to 52 cents per share and adjusted EPS of 80 to 88 cents per share. Xerox continues to expect to generate operating cash flow from continuing operations of $700 to $900 million and free cash flow from continuing operations of $525 to $725 million in 2017.